Indonesia Economic Outlook Q1 2025 – Chasing 8, Struggling at 5
Indonesia's economy showed consistent growth in Q1 2025, with GDP projected to grow between 5.00% and 5.05%. However, this steady growth rate, maintained since 2014 (excluding the COVID-19 period), indicates a risk of secular stagnation, highlighting the need for structural reforms to enhance productivity and reduce reliance on seasonal factors. Household consumption, contributing 53% to total economic activity, grew by 4.93% year-over-year due to national holidays, while inflation fell to 1.84% in September 2024.
Investment dynamics revealed Foreign Direct Investment (FDI) growth of 18.6%, contrasting with declining Domestic Direct Investment (DDI). Additionally, the Rupiah depreciated by 2.91% amid global geopolitical tensions. To ensure sustainable economic development, Indonesia must pursue structural transformation and implement policies that support domestic investment and economic diversification, securing resilience against external shocks and fostering long-term prosperity.